A provision in Tennessee's new motor vehicle law shifts the burden of proof when manufacturers demand costly facility upgrades.
Most Tennessee dealership owners don't realize that until recently, manufacturers could demand they relocate or invest tens of thousands—or hundreds of thousands—in facility upgrades with little legal recourse. That changed with SB0608, which became law on May 5, 2026.
The bill amended Tennessee Code Annotated, Title 55, to address motor vehicle dealer-manufacturer relationships. Buried in Section 2, subdivision (c)(26) is a provision that fundamentally reshapes how manufacturers can demand facility changes from dealers.
Under the new rule, manufacturers and distributors can no longer force dealers to relocate their business or make substantial facility investments unless the manufacturer can prove the demand is reasonable given current market and economic conditions.
This shifts the legal burden of proof. Previously, a dealer challenging a facility mandate had to prove it was unreasonable. Now, the manufacturer must demonstrate it is reasonable—a meaningful difference that protects dealers from arbitrary or economically unjustifiable demands.
Why does this matter? Facility upgrades aren't minor expenses. A relocation, building renovation, or equipment installation can easily run six or seven figures. For a small dealership operating on typical margins, a sudden $200,000 or $500,000 mandate from a manufacturer can be devastating, especially if market conditions don't support the investment.
This protection applies to dealership businesses operating under manufacturer or distributor agreements in Tennessee. It's most relevant to independent and smaller dealerships that lack the capital reserves of larger operations to absorb unexpected facility demands.
Manufacturers and distributors should also take note: the law now requires them to justify facility requirements with concrete evidence about market conditions and economic viability before imposing them on dealers.
If you operate a dealership in Tennessee, review your current manufacturer agreements. Understand what facility obligations you've already committed to and which ones might be subject to challenge under the new standard.
If a manufacturer approaches you with a facility demand after May 5, 2026, you have grounds to request documentation of how that demand aligns with market and economic conditions in your area. The burden is on them to prove reasonableness, not on you to prove it's unreasonable.
Document your local market conditions, sales data, and economic circumstances. This evidence becomes your foundation if you need to push back on an unreasonable demand.
For manufacturers and distributors: ensure any facility requirements you impose on dealers are supported by market analysis and economic justification. Vague directives or demands based solely on brand standards will face legal scrutiny.
SB0608 became effective upon approval on May 5, 2026. The facility provision is codified in Section 2, subdivision (c)(26), Page 1 of the bill. Dealership owners and manufacturers seeking detailed guidance on how this applies to specific agreements should consult legal counsel familiar with Tennessee motor vehicle dealer law.